Debt Consolidation Loans

Personal debt consolidation loans are advertised frequently. The idea is that you can use a low-interest loan to pay off high-interest cards and other balances. Lower fees will save you money, but you will still owe the same amount plus origination fees and other charges. With a loan, you make one payment per month. It is convenient, but it’s not a good reason to go this route.

Repayment Plans

With debt consolidation plans, you pay a third party to make payments for you. This strategy may involve negotiating with creditors to reduce your interest rates, balances and penalties. Your participation in the plan will usually show on your credit report and can affect your ability to get new credit. With debt consolidation plans, you are restructuring your monthly payments. Debt Consolidation Advantages

  • With debt consolidation, you’ll have fewer monthly payments.
  • Managing your finances is easier when your balances are rolled into one account.
  • It’s possible to reduce the amount that you owe by negotiating with creditors.
  • If the interest rates and fees are lower, your payments will be more manageable.
  • With a low-interest loan, you can spend less and pay off the debt faster.

Debt Consolidation Risks

  • You are not immune to lawsuits and adverse actions initiated by your creditors.
  • If you get behind on your payments, the repercussions can be more severe.
  • You could lose your collateral if you take out a secured loan to pay unsecured debts.
  • Some debt consolidation loans have introductory teaser rates that will increase.

Debt consolidation addresses a symptom, but it does not help you manage your money.

Debt consolidation is one alternative to consider before bankruptcy. You need to compare offers to find the best solution, and you must be disciplined enough to stick to your budget and to avoid racking up new debts.

If you’re considering debt consolidation, call Gary Hammond of Mitchell & Hammond today to schedule a free consultation. I will review your finances personally and work with you to assess your goals. Don’t hesitate to call me at 405-216-0007. I am always available to answer questions and address your concerns.

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